The Turkish lira was pounded for a second day on Thursday, after Turkey’s central bank sided with President Recep Tayyip Erdogan in his “battle” against interest rates.
rose as high as 11.2978 lira from 10.6281 on Wednesday and 10.3408 on Tuesday.
The Central Bank of the Republic of Turkey cut interest rates to 15% from 16%, after Erdogan last month dismissed three central bank officials, and on Wednesday stepped up his campaign with his rhetoric .
Turkish CPI has jumped 20% in the 12 months ending October — hardly the conditions for an interest-rate cut.
The one slight nod to price pressures was the central bank saying it would consider completing the use of “the limited room implied by [supply-side] factors in December.”
“By throwing a bone to markets in the form of December rate guidance, the CBRT narrowly avoided a full blown currency crisis, but speculation over the lira and rates in Turkey will remain elevated. In our view, USDTRY is just one Erdogan headline on inflation away from sliding through the 11 handle,” said Simon Harvey, senior fx market analyst at Monex Europe, in comments written before the lira did fall through the 11 mark.
The Turkey BIST 100 stock market index
Continental European stock market indexes had a sluggish Thursday, with the Stoxx Europe 600
weakening 0.2%, with energy producers and pharma stocks lower.